As I recently noted, much of the IT industry detests Amazon Web Services, with VMware in the lead. In my own discussions within the industry, it's obvious that AWS is regarded with a mixture of astonishment, loathing and fear.
In fact, looking at these kind of results, terror might not be too strong a word:
- VMware pre-announced its Q2 results, which will come in below estimates, though the company claims its full-year results will meet expectations (between $5.12 billion and $5.24 billion).
- Oracle, IBM, and Tibco all announced poorer-than-expected results. Each blamed "sales force execution" as the reason for missing its targets. To an outside observer, it's remarkable how sales representatives throughout the industry have suddenly misplaced their sales skills.
- Most of the industry is piling on the OpenStack bandwagon, seeking a plausible cloud orchestration alternative to slow down the AWS juggernaut.
(I'll give only a fleeting mention to the semi-hysterical rant by top VMware management at a recent partner event.)
One can understand the panic of the traditional systems and software vendors when they see AWS headlines such as these:
- A Citigroup report says AWS is an order of magnitude larger ($3.4 billion) than its largest competitor, Rackspace ($300 million).
- Research firm R. W. Baird predicts AWS will hit $10 billion in revenues by 2016, while investment firm Bernstein Research sees that number at $20 billion by 2020.
- Baird also says every dollar spent on AWS results in $3 to $4 less being spent with traditional vendors. In other words, that means AWS represents a 75 percent discount to traditional pricing.
Combining these predictions, AWS could represent $80 billion less spent with IT enterprise vendors in 2020, with, of course, reduced revenues from now until then. Over the next seven years, the industry might be looking at $100 billion in "lost" revenue. That's big.
AWS Appears to Be Growing Like Gangbusters
This came to mind when Amazon announced that its S3 service has just reached 2 trillion objects, just 10 months after it reached 1 trillion objects in storage.
You can see from the chart below that after a slight slowdown in 2012, S3 growth appears to be moving to near-vertical levels. By my calculations, S3 is now at a 120 percent annual growth rate, which may be accelerating.
Amazon S3 is growing at a rate that's hard to comprehend.
I got to wondering: How much revenue does that represent for S3? The main variables are how large the objects are and how much total storage each account has, since the price per GB of S3 storage for each account declines with total storage volume. As a rough estimate for S3 cost per GB, one can use $1/GB/year, while recognizing there is certainly some variability around that number.
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